- 12 -
remaining 50 percent of the combined taxable income is allocated
to, and treated as, the taxable income of the appropriate U.S.
affiliate or affiliates. Sec. 936(h)(5)(C)(ii)(I), (III).
Combined taxable income equals the gross income of the section
936 corporation and its U.S. affiliates derived from sales of the
possession product to nonaffiliates or foreign affiliates less
the expenses of the section 936 corporation and the U.S.
affiliates allocated and apportioned to such gross income. Sec.
936(h)(5)(C)(ii)(II). Thus, the section 936 credit equals the
tax attributable to 50 percent of the combined taxable income
figure.
Congress recognized in enacting section 936(h) that some
section 936 corporations produce products that are not sold as
such to unrelated parties, but rather are transferred to
affiliates and used as component parts in the production of other
products that are then sold by the affiliates to unrelated
parties. Congress directed the Secretary of the Treasury to
write the rules with respect to such component products. Section
936(h)(7) requires the Secretary to prescribe such regulations as
may be necessary and appropriate to carry out the purposes of
section 936(h).
Section 1.936-6, Income Tax Regs., provides the following:
3(...continued)
the meaning of sec. 482. Sec. 936(h)(5)(C)(i)(I)(b).
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011